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2015 (11) TMI 1466 - HC - CustomsLevy of customs duty on goods cleared from SEZ to DTA and non-processing area of the SEZ - retrospective levy - Challenge the constitutionality and legality of Government Notification No.25/2010-Customs dated 27.2.2010 - levy of customs duty at the rate of 16% advalorem has been levied on electrical energy removed from Special Economic Zone - The power supply from the power plant which is inside the SEZ area from where the power is supplied outside the SEZ area is in dispute in this petition. - Held that - Petitioner should not be made liable to suffer double taxation, and the petitioner is made to pay the custom duty for the energy supplied then payment on duty of raw materials or any other duty on inputs should not be levied on the petitioner, and the duty paid by the petitioner on raw materials is liable to be refunded, as otherwise, the levy of duty on the power supplied to DTA from SEZ amounts to double taxation and it would be in violation of Article 265 of the Constitution of India. Custom duty at the rate of 16% advalorem levied by Notification dated 27.2.2010 could not be imposed retrospectively w.e.f. 26.6.2009 and, therefore, retrospective amendment is illegal and arbitrary and deserves to be set aside. Petitioner is entitled for exemption from payment of custom duty for the period 26.6.2009 to 15.9.2010 on the electricity cleared to DTA from SEZ. We are further of the considered opinion that the entire proviso to Government Notification No.25/2010-Customs dated 27.2.2010 is violative of Section 25(1) of the Customs Act, 1962 read with Section 30(a) of the SEZ Act, arbitrary and liable to be quashed. In view of the above, the said Notification No.25/2010-Customs dated 27.2.2010 as well as Notification No.21/2002-Customs as amended by Clause 60 of the Finance Bill, 2010 (Second Schedule thereto) are ultra vires Entry 83 of List I of Seventh Schedule of the Constitution of India, Section 12 of Customs Act, 1962 and Section 30 of SEZ Act, 2005 as well as Articles 14 and 265 of the Constitution of India and consequently deserves to be quashed and set aside. - Decided in favour of assessee.
Issues Involved:
1. Constitutionality and legality of Government Notification No.25/2010-Customs dated 27.2.2010. 2. Applicability of customs duty on electrical energy removed from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA). 3. Retrospective levy of customs duty. 4. Double taxation. 5. Refund of Bank Guarantee. Detailed Analysis: Constitutionality and Legality of Notification No.25/2010-Customs: The petitioners challenged the constitutionality of Notification No.25/2010-Customs dated 27.2.2010, which levied a 16% ad valorem customs duty on electrical energy removed from SEZ to DTA. They argued that this notification is ultra vires Entry 83 of List I of Schedule VII of the Constitution, Section 12 of the Customs Act, Section 30 of the SEZ Act, and violates Articles 14, 19(1)(g), and 265 of the Constitution of India. Applicability of Customs Duty: The petitioners contended that under Section 30(a) of the SEZ Act, goods removed from SEZ to DTA should be treated as imported goods and thus should be exempted from customs duty as per Section 25(1) of the Customs Act. The respondents argued that Section 30 of the SEZ Act is a charging section akin to Section 12 of the Customs Act, and the duty is levied on goods removed from SEZ to DTA. Retrospective Levy of Customs Duty: The petitioners argued that the retrospective levy of customs duty from 26.6.2009 to 27.2.2010 is illegal and arbitrary. The court noted that any amendment imposing a new tax or duty must be prospective as it amounts to substantive law. The retrospective amendment in this case was deemed illegal and arbitrary. Double Taxation: The petitioners claimed that they were already paying duty on raw materials like coal under Rule 47(3) of the SEZ Rules, and the additional customs duty on electrical energy amounted to double taxation. The court agreed, stating that the petitioner should not suffer double taxation and is entitled to a refund of the duty paid on raw materials. Refund of Bank Guarantee: The court directed the respondent authority to return the Bank Guarantee furnished by the petitioners in compliance with the interim order dated 6.5.2010. Conclusion: The court held that the entire proviso to Government Notification No.25/2010-Customs dated 27.2.2010 is ultra vires Articles 14 and 265 of the Constitution of India and is quashed. The petitioners are entitled to exemption from payment of customs duty for the period from 26.6.2009 to 15.9.2010 on the electricity cleared to DTA from SEZ. The respondent authority is directed to return the Bank Guarantee furnished by the petitioners.
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